The 海角视频 Government has taken an equity stake in one of Wales’ leading cleantech ventures, Hydro Industries, as the business looks to accelerate global expansion plans.
The Llangennech-based firm is one of 16 firms in Wales to have secured backing from the 海角视频 Government’s now fully invested Future Fund, which has provided convertible loan backing to more than 1,000 mainly tech firms across the 海角视频. The vast majority of the £1bn has gone to firms in London and the south east of England. The total investment in Wales is £8.7m.
A condition of the Future Fund is that when debt is converted into equity the 海角视频 Government gets a stake at a 25% discount to the required match funding investors.
Hydro secured £3.5m from the Future Fund with £4.6m from existing backers. With the Future Fund debt now converted into equity it gives the 海角视频 Government a 2.5% stake in a deal that values Hydro at north of £150m.
The match equity has come from existing shareholders in the business that include co-founders of Admiral Henry Engelhardt and his wife Diane, and David Stevens and Heather Stevens.
Chief executive of Hydro Industries, Wayne Preece, on the discount position of the 海角视频 Government, said: “Having invested million and done all the hard yards, that was a challenging conversation with our investors, but we got past that because the 海角视频 Government is now an equity holder, a much stronger proposition for doing business in Saudi Arabia, Kuwait and the Middle East... it’s really an advantage.
"So, the Future Fund is a real positive impact as it has firmly placed the 海角视频 Government in our corner giving us greater credibility in the marketplace."
He added: “The discount is protection I guess for the taxpayer, but with a lot of the overseas contracts that we delivering and bidding for, whether they are in Egypt or Saudi, we are generally dealing with government bodies. So, for a relatively small firm like Hydro, having the 海角视频 Government behind us is very important.”
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As part of its growth strategy, Hydro is looking at significant expansion in both Saudi Arabia and Kuwait. Last year Hydro secured a lucrative contact with Egypt’s East Gas Company to deliver a water treatment plant to service an oil terminal on the Red Sea coast, near the popular tourist resort of Hurghada.
In a ten year contract, one of the biggest ever secured by an indigenous SME, Hydro will ensure that all water discharged back into the Red Sea meets strict new environmental standards set by the Egyptian Environmental Agency. The first plant using its technology is expected to go live later this year. If it goes to plan more plants are expected to use Hydro’s technology in Egypt.
Mr Preece said: “The work we are doing in the Red Sea is a really interesting story. Hurghada has 4,000 coral reefs, so this is a real bluechip deal for us, not just the amount of money involved, but also in it being a wonderful environmental story for a Welsh company with its own technology being able to win a global tender."
“What we are doing is cleaning what is called produced water, which is a problem right across the Red Sea and for every one site the Egyptians have got the Saudi’s have got a hundred. So, the scale potential for this is huge. The Department for International Trade also recognises that we are scaleable and their teams in Kuwait, Saudi Arabia and Egypt are really hungry for us to meet ministers in those countries and help grow a British company."
Hydro employs around 70 at its Llangennech HQ while it is actively recruiting in Egypt, where it has approaching 30 staff. In Saudi it has significant growth plans. It is already working in Kuwait, another marketplace where Hydro is upbeat on its growth outlook.
Mr Preece said: “We have taken on 35 new staff just over the last six months even with Covid going on. It’s a real great Welsh jobs story with bright local Welsh gaduates being hired with PhDs in chemistry and environmental sciences. There are not many companies that are hiring at the level in West Wales”.
On expansion he added: “We should see huge growth and switching on the Egyptian plant will change the company significantly, but it probably pales into insignificance when you look at the possible deals we are looking at in Saudi Arabia and Kuwait – our intensity needs to continue”
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It is also looking to leverage 海角视频 Export Finance, which provides billions each year from the 海角视频 Government to help firms win contracts overseas.
Mr Preece said: “As an example, the British government will validate our potential export client, which maybe a foreign government, who will be loaned the money which may be pay back over 5 to 10 years. What it means is that it de-risks projects for companies like ours”. Other foreign countries having being doing this for many years and its great that the Uk Government supports such a programme.”
Mr Preece said the Welsh Government could play more of a role, working the 海角视频 Government, in signposting and encouraging Welsh firms to access the tens of billions in public funding that exists at a 海角视频 level to support business, not just in export credit finance, but from organisations like Innovate 海角视频.
The chief executive said: “If you look at how many Welsh firms have accessed these funds, and it might be because they haven’t been applying, the numbers should be higher as these are massive sums of money. So, on a positive side, Welsh Government could look at this by considering setting up a taskforce to make sure Welsh firms, and there are lots of great ones, get hold of this funding, particularly on the environmental side.”
On future funding for Hydro he said: “You can never discount another fundraising round because Hydro is a project company and when projects come you have got to look at it. However, our target going forward is to utilise the 海角视频 Export Finance model as it suits us, as it is export focused and about growing jobs. The 海角视频 Government has put that money there specifically to target companies like us who want to grow and there is more than enough there for our growth.”
On the role of the 海角视频 Government as an equity holder in Hydro he said: “Government is traditionally not good at running businesses, and they leave that to the business people. Whatever the exit strategy is for us, I’m sure they are taking a view that we will do so at the maximum (return on investment) possible stage.”